Over 550 trucks arrive at the stores belonging to the Russian retailer Lenta in St. Petersburg every day. They supply the stores in the city of five million people with groceries and popular products from the non-food sector. This amounts to around 150 tons per store each day. Lenta relies on the discounter principle with low-cost consumer goods and opening times around the clock, seven days a week. The complete stock is turned over in just 10 days. With this concept, the enterprise is regarded as a pioneer in Russian retailing, because Russians generally still tend to shop in small and traditional Ma and Pa stores. Goods are often sold on via several parties before they reach the actual end consumer. But this is all set to change. Lenta is already attracting more than 40,000 customers a day with its concept of selling a limited range of fast-selling brand products in large stores, and the trend is likely to continue. The 2,500 or so Lenta employees will double sales in 2004 to an expected 480 million US dollars.
Solution with a wider view
In June of this year, a further store with an area of 20,000 m_ was added to the company’s original four, and the next store opening is already planned for September 2004. With the rapid growth, the data volumes to be managed, and thus the demands placed on the cash & carry chain’s IT system, have growth enormously. The original IT system, a company development that was previously used on a decentralized basis, had thus reached its limits. Lenta was faced with the need to implement reliable information technology that could keep pace with the company’s expansion. With SAP for Retail, the old IT patchwork of individual solutions and numerous store and department interfaces was to be replaced by an integrated solution. “We needed a software that we could set up effectively with regard to our future expansion efforts,” states general manager and owner Oleg Jerebtsov, explaining the decision in favor of SAP.
The aim was to create a reliable ERP solution that creates a high level of transparency for reliable decision-making, reduces costs, and guarantees the necessary investment security. Lenta was prepared to completely rethink all its business processes, and to reengineer them, if necessary. With regard to user friendliness, the standardized interface would simplify communication. It was clear to the managers at Lenta that all logistical and financial functionalities needed to be redesigned and implemented. Lenta chose SAP’s industry solution – and hired Novasoft AG as the consulting and implementation partner. SAP for Retail covers all retail-related components. In addition, the Novasoft consultants implemented the Financial Accounting (FI), Controlling (CO), Sales and Distribution, (SD) and Materials Management (MM) components.
Efficient material planning at 30 minute intervals
With the introduction of the retailing system, all processes for handling purchasing and sales, master data, and the individual processes in each store were drawn together in an integrated solution. For Lenta, one thing was particularly important, namely that the interface to the points of sale is mapped in a stable way and integrated in the system. With the newly designed goods receipt process, the prices and quantities of the delivered products can be checked in just a single step, which in turn also simplifies the invoice verification process. Planning of goods receipt for shipments has largely been automated in the integrated SAP solution. This had previously been a headache for Lenta because of the huge volume involved. “We now have a much better overview of the current sales figures on the one hand, and have much better planning options on the other, and can therefore react to current demand quickly – and have trucks arrive at much shorter intervals,” says Jerebtsov of the immediate effects of the software implementation. The solution now replans the deliveries every 30 minutes, in order to avoid overlaps and waiting time at the gates of the individual stores. And it’s not just round-the-clock opening hours for customers; delivery of new goods is also possible 24 hours a day, seven days a week. The short response times particularly pay off in the area of perishables planning – that is, the ordering and storage of goods with a short shelf life.
The freight and transportation processes are completely integrated in the supply and value chains. Merchandise logistics is integrated in SAP Financial Accounting, and thus optimizes Controlling. An SAP-specific module for controlling returnable packaging was modified by Novasoft so that the company can trace at any time which returnable packaging items are assigned to which supplier, and where deposits are owed or need to be paid back. This considerably simplifies processes in logistics and invoice verification, and leads to cost reductions in the medium-term.
Warehouse stock reduced – assortment control optimized
Today, all Lenta’s business processes are controlled clearly from end to end. The company thus has reliable data for its decision-making processes. Inventory management on an article basis makes it possible to manage the assortment on the most detailed level possible. The contribution margin can therefore be optimized, turnaround times increased, and the warehouse stock reduced.
The data consistency that has been achieved across the whole solution simplifies communication between the individual departments and stores. Previously, each store had its own merchandise management system. In future, error-prone duplicate entries will be avoided thanks to the integrated system. The comparison between the individual stores has also been improved – and price and assortment adjustments for each individual store is now possible.
mySAP CRM on the wish list
According to Oleg Jerebtsov, one of the main factors driving the success of the project is the direct communication between the 160 users at Lenta and Russian or Russian-speaking IT experts at SAP’s implementation partner Novasoft. “With Novasoft, we brought top-class SAP expertise into our company. We are benefiting enormously from the consultants’ industry knowledge,” states Jerebtsov. At the moment, Novasoft is implementing the SAP Business Information Warehouse (SAP BW) in order to optimize inventory management. Lenta also plans to convert payroll accounting to SAP Human Resources (SAP HR) and to integrate various components of mySAP Customer Relationship Management (mySAP CRM). With SAP, the foundations have been laid for data-assisted customer orientation. 60 percent of purchases at Lenta are already transacted with a customer card, which offers customers attractive conditions – and provides the company with important information for optimizing its product and marketing policies.
Jerebtsov is convinced that the company has thus established the IT conditions necessary for the planned future growth. By the end of 2005, the retailer intends to extend its network to 12 stores in St. Petersburg alone, and this will mean coordination of twice as many goods and employees and twice as much data.